Reform window is open

Union Budget 2011 has been overall positive as it has avoided being overtly populist and has kept the window open for further reforms.

FMs goal of fiscal deficit at 4.6 per cent for FY12 is consistent with the direction outlined by FRBM.

Other announcements on the introduction of a Bill to enable RBI to move on new banking licenses and FDI reforms, as well as the decisions to keep Excise Duty and Service Tax at existing levels have evinced a positive response from the markets and will be good for the investment climate.

The intention to move fertilizer and kerosene subsidies into direct mode using UID, instead of the PDS, will result in efficient delivery of subsidies and eliminate wastage.

Reform window is open

FM has sent a clear signal indicating that growth is important and will not be sacrificed. One can see this in excise sops in auto sector not being rolled back and FIIs being allowed to invest more in corporate bonds of infrastructure companies.

Nil excise on equipment for UMPP is also a positive move which protects domestic industry without creating tariff barriers.

Service tax on hospitality, insurance, healthcare, air travel etc will impact these sectors but should be seen in the context of eventually Service Tax becoming applicable on all services.

Allowing foreign investors to invest directly in Indian Mutual Funds seems like an interesting move to bolster MF flows.

Budget has been silent on many things like extension of STPI for IT Companies, retail FDI, etc, but overall FM has clearly indicated that government will be committed to fiscal consolidation and reforms.

Budget positive for education sector

The Union Budget 2011 has been particularly positive for the education sector, a prerequisite for any country's growth and development.

India is expected to clock an annual GDP of around 9 per cent in years and will also account for 25 per cent of the global increase in workforce over the next four decades.

On the flip side, India will have the highest number of illiterate adults and a large percentage of unemployable literate people.

The government's allocation of Rs. 52,057 crore (Rs. 520.57 billion) for the education sector and another one of Rs. 21,000 crore (Rs. 210 billion) specifically for the primary education segment is indeed an encouraging step to not just widely extend the benefits of education but also impact the quality to achieve global benchmarks.

Image: India will account for 25 per cent of global rise in workforcePhotographs: Reuters

Budget positive for education sector

I also reiterate that there is a need for a PPP model in the sector not just to execute the delivery but also employ modern technology infrastructure across schools enabling rapid proliferation of world-class education.

Another positive announcement was an additional Rs. 500 crore (Rs. 5 billion) allocation for the national skill development fund.

Every sector in India is challenged with severe crunch of skilled workforce and such initiatives by the NSDC will no doubt help fill the gap by training about 10 lakh workers in the next 10 years.

But, the gap is widening and there will be a need for around 50 crore skilled workers across sectors in India by 2022.

The government and NSDC in particular should look at employing technology as a strategic partner to fast track and bridge this gap.

Pragmatic Budget

The Union Budget 2011-12 presented by the Finance Minister Pranab Mukherjee is a pragmatic one. The vision towards bringing down the fiscal deficit to 4.6 per cent next year, 4.1 per cent in 2012-13 and 3.5 per cent in 2013-14 is very welcome.

We hope the FM has drawn up a clear roadmap and that the government will take all necessary measures to deliver on this promise.

Another positive aspect of the Budget is that there is continuity in the overall direction and there are no dramatic changes in policy focus.

Infrastructure, urban and rural development and education continue to be focus areas for government spending.